Does the Prime Minister tell lies on purpose or by accident?

Yesterday’s Prime Minister’s Question Time threw up yet more examples of David Cameron’s tendency to say stuff that just isn’t true.

Royal Mail

I have previously written about what each of the main parties said about Royal Mail in their manifestos for the last election. Not only was David Cameron wrong to claim that Labour said in their 2010 manifesto that they would privatise Royal Mail, it wasn’t in the Tory manifesto either! The Lib Dems did say they would sell a 49% stake in Royal Mail – but instead a majority stake has been sold and the other safeguards they mentioned were not delivered either. There was no mention of “mates rates” – certain investors being given privileged access to shares – or selling the shares at £1.4 billion below their value.


David Cameron has repeatedly used the NHS in Wales as a political punch bag, despite the fact that it is the UK Government which has slashed the Welsh budget by £1.7 billion. Despite these cuts (which have been exacerbated by the deficiencies in the Barnett formula which looks at population only and not need), Wales continues to spend more per person on the NHS than England. The Welsh Government needs to look at the whole picture, so although it has prioritised health spending it has also done things such as Jobs Growth Wales, which by creating 11,000 good jobs for young people has contributed to unemployment (and specifically youth unemployment) being lower in Wales than any other part of the UK.

At last weekend’s Welsh Labour Conference, it was good to hear our leading politicians making the case for what the Welsh Government is doing – and to be reminded of the dreadful state the NHS in Wales was in last time the Tories were in charge. You can read Ed Miliband’s speech here and Carwyn’s speech here. There was no complacency about the health service, education or anything else – there was recognition that there are significant challenges which need to be addressed.

My family’s experience of the NHS in North Wales has been very positive. There are staff shortages, which suggests to me that we should be doing more to get young people to pursue a career in health and I would like to see us doing more to train people here in North Wales (which would also help with ensuring we have enough qualified health professionals who can speak Welsh, thereby enabling people to receive services in Welsh if that is what they want). But I don’t think constant attacks on health professionals can be good for morale. I can’t imagine that the Tories declaring war on Wales will help David Jones and Guto Bebb keep their seats. It seems that David Cameron has given up on them and is parading a Welsh bogeyman to scare English voters into sticking with him.

Most of us are worse off as a result of this Government – they admitted it in the budget

Today’s PMQs was bad-tempered as usual. I am often struck though at David Cameron’s willingness to say stuff that he must know isn’t true. Alongside the budget, the Treasury published a distributional analysis showing the impact on families not just of this budget but of the various changes introduced since 2010. You can download the full document here.

The following chart shows the Government’s own modelling of what they think the cumulative impact of their changes will be by 2015:



The chart shows every single section of society will be worse off as a result of this government’s changes, with an average “hit” of £757 per year. Moreover, although it is true that those at the top of the tree are bearing the largest burden, the next most significant “hit” is for those on the lowest incomes. Yes the changes in tax are positive, but these changes are more than wiped out by the changes to tax credits and benefits. The changes in public service spending have a massive impact on the poorest families.

And remember these changes are only the ones that the Government is intending to cause – they don’t take account of the fall in real wages which has occurred over recent years. Labour’s claim that wages have fallen by an average of £1,600 in real terms is backed up by the Institute for Fiscal Studies, who anticipate further falls in wages over the next couple of years and that the poor will again be hit harder than the better off.

The truth is that the Government’s welfare reforms hit working families harder than those out of work. As I am sure the Labour team will be emphasising in today’s debate, cutting welfare spending would be a good thing – but the way to do that is to get people back into work. It is this Government’s failure to tackle low wages, the impact of cutting public spending too far and too fast and the fact that house-building (particularly social rented housing) has fallen of a cliff that are the reasons for welfare spending going up. The Government is set to spend £13 billion more on welfare over this Parliament than George Osborne originally planned.

The bedroom tax is so badly thought out it will probably end up costing more rather than saving money – as well as causing huge misery for those affected. The single most important change to the welfare system in my view is the Compulsory Jobs Guarantee proposed by Ed Milliband, to get young people and the long-term unemployed to work. Everyone has something to contribute and I want to see a society which helps everyone to do so. It is in their personal interests and it is in our collective interest to do so.

A small number of good choices is much better than an infinite choice of bad options

The Government’s decision to “liberalise” pensions is in serious danger of removing choice rather than enhancing it. Why?

This article from the New York Times helps to explain the problem. Given a choice between a “defined benefit” pension scheme and a defined contribution scheme most of us would prefer the former. But the decision to buy an annuity is complex and scary and involves making a gamble. We feel we are likely to be ripped off (and often we are). Psychologically we’re not happy with the idea of deciding how long we are likely to live. So we make bad choices.

As John McTernan has pointed out, pensions are a collective solution that works. It is in all our interests that everyone has a pension so that they can afford to live as long as they live. Apparently the pensions minister is happy for people to use their pension pot to buy a Lamborghini because the worst case scenario is that they will end up having to live on a state pension. But actually this ignores the huge concerns over the rising cost of care. As Andrew Dilnot, Chair of the Government’s Commission on Funding of Care and Support said in launching the Commission’s report:

The issue of funding for adult social care has been ignored for too long. We should be celebrating the fact we are living longer and that younger people with disabilities are leading more independent lives than ever before. But instead we talk about the ‘burden of ageing’ and individuals are living in fear, worrying about meeting their care costs.

The current system is confusing, unfair and unsustainable. People can’t protect themselves against the risk of very high care costs and risk losing all their assets, including their house. This problem will only get worse if left as it is, with the most vulnerable in our society being the ones to suffer.

As well as the problem for individuals, the cost to Government of supporting people whose savings have run out is considerable. So although there is a windfall to the Treasury of moving away from annuities (take your lump sum now, and the tax on it gets paid now too), this is only bringing forward future income rather than creating new income – and in the long term these changes will cost welfare budgets more too. Government does have a financial interest in ensuring that people are able to provide for their old age in a way which means that they don’t have to fall back on the state as well as being in a position to ensure we are all able to exercise meaningful choices right to the end. As the Institute of Fiscal Studies has pointed out, these changes are likely to destroy the market in annuities – so that option will no longer make sense.

There is a win-win alternative: instead of abolishing the requirement to buy an annuity because the annuity market doesn’t work very well, why not offer a fall-back option for people of a government-backed annuity? Require pension providers to inform their clients of the government option: a statement along the lines of “stick with us and you can have £1,000 a month or transfer to the Government scheme and you can receive £1,200 a month” would put an onus on providers to sharpen their pencils or lose business. Of course other options may make sense for some people (paying off debt will always make sense). But the starting point should be for anyone wanting to explore other options to take independent financial advice with very clear recommendations recorded and retaining the tax benefits should depend on this advice being followed – and that the solution provides a long-term income stream.

A Not Very British Institution


This article by Matthew Engel is interesting. But his conclusion that centralisation would be worse doesn’t mean we should keep commissioners. What we should replace them with is a system which requires local consensus on priorities, appointments and dismissals. Being high profile was never the success criteria for police authorities, but ensuring high quality members, held to account by their local authorities would be hugely more democratic than the system that we now have.

It should be no surprise that very few members of the public have asked public questions of their Police Commissioners, as reported by the BBC here. As I wrote while still in office as Chief Executive of the North Wales Police Authority, there are steps that can be taken by a Commissioner who wants to be accountable and who wants to build a local consensus on what is needed. I am sure that a few of them are doing their best in this regard. But the system as set out in law does not require this. Whereas the previous system required regular progress reports on a whole range of issues and the vast majority of them were published and considered in public by members who were expected to have put the time into reading them, the new system is designed to achieve the opposite – to give a single individual the authority to push through their personal agenda without needing to justify themselves to anyone (they can over-rule the Panel even if all members of the Panel disagree). Scrutiny of the Force is a matter for the Commissioner – so if the Commissioner wants to scrutinise in private rather than in public, that is their choice.

As recent events in Ukraine have highlighted, democracy as “one person gets elected and then does whatever they want” is inherently unstable. It may well appear to work well if the individual is intelligent, benevolent, honest and wants to listen to other opinions, then again, a committee system or parliamentary system can work really well when led by such a person too. Where those attributes are missing or there are really difficult decisions to be made which require a consensus rather than simply a choice to be made, systems which “hear all the voices” are much better.

The current commissioners will serve until May 2016. It is important that a better system then takes over.

The Co-operative Movement should have a voice in politics

Had it not been for this article in the Guardian I don’t know whether we would have bothered to complete a questionnaire from the Co-op despite receiving a letter about it this week. We are longstanding members of the Co-op and of the Co-op Party. Our local store is fairly small so we don’t do all our shopping there, but we like the ethical stance and we use the group for a range of other services as well. Yes we were concerned at the media coverage of the problems at the Co-op Bank but those problems clearly weren’t as serious as for many other banks and we are satisfied that action is being taken to address the problems and to improve the governance – without moving away from the ethical stance which has kept us with them. The reason for not necessarily prioritising a questionnaire is that we are generally happy for the Co-op Group to continue – and for the Co-op Party to continue as part of the wider movement and therefore might not have prioritised the time to fill in the questionnaire.

According to the Guardian, Euan Sutherland (Chief Executive of the Co-op Group) says “the Co-operative has lost touch with its customers and members and with the communities in which it operates – we haven’t been listening.” Fair enough, I agree there is a problem – but with this type of survey, the way that you ask the question has a significant bearing on the response.

The general public don’t have a high opinion of politics or of political parties. So if you ask “To what extent do you think it is appropriate or inappropriate for big businesses to donate money to political parties?” and whether politics is more or less important than local community, I think we can guess what most people would answer.

The perception is that people involved in politics are mostly in it for themselves and/or spend far too much time listening to wealthy donors and that building a brighter future is all but impossible. We can speculate as to the events which have brought us to this sorry state of affairs, but for me it is more important to think about how we change it. The last thing we need to do to renew faith in politics is for anyone with principles to withdraw. Politics isn’t a spectator sport – despite that being how it is usually depicted on TV. Whether our rugby or football team wins or loses may determine whether we are happy or sad, but who wins in politics makes a real difference to people’s lives. Often it makes the most difference to those who pay it little heed – those who are struggling to provide for their families and for whom the minimum wage, tax credits and affordable childcare made a big difference.

I am proud to be a member of the Co-op Party and what it stands for – that people will achieve more by working together than they can by working alone. The manifesto at the last General Election made a lot of sense in terms of the long term solutions needed to improve our economy and restore faith in public services. It is undoubtedly a positive influence on its sister party, the Labour Party which has sometimes been rather too keen on imposing statist solutions rather than co-operative or mutual solutions (i.e. doing things to people instead of involving the people affected in designing the solution for themselves). Ed Miliband himself highlighted the importance of co-operative values before he was elected Leader of the Labour Party and last week wrote about people-centred public services.

There is a deeper contribution made by the Co-operative Party – which is to provide a link between the broader co-operative movement and politics. So no I don’t particularly want “big business” to be involved in politics – but I do want to see far more involvement from membership organisations, whether that is in terms of direct support for political candidates or more generally engaging in a debate about how improve our local communities, Wales or the United Kingdom. Could the Co-op movement engage more effectively with its members and supporters and help get them more involved in community initiatives? Yes undoubtedly and politics should be seen as part of that. The Co-operative Party itself needs to change and to get far more people involved – with fewer committees and more opportunity for real engagement. That is a huge but important task which the new General Secretary, Karin Christiansen, has already started working on. I hope the wider Co-operative movement will support her in this, rather than pulling the rug from beneath her.

The Greatest Hero of my lifetime

Thirty years ago I read Nelson Mandela’s court statement. It was a political education and an inspiration in the form of a booklet from the Wales Anti-Apartheid Movement – something I was proud to be a part of. Of course it is now available online (see here for the full text).

The 70th Birthday Party organised by the ANC and the Anti-Apartheid Movement to bring world attention to his continued incarceration was a stroke of genius. The campaign mug is still in regular use:


Watching his release from prison as I sat in my college room brought me to tears – embarrassing when there was a knock on the door from a friend. The Specials song – a favourite at college bops was changed from “Free Nelson Mandela” to “Freed Nelson Mandela”.

But Mandela’s great achievements really were ahead of him at that point. He used his immense personality not to inspire revenge against his oppressors but to bring people together in reconciliation, united against racism to build a new society. “I am not a saint” he said, “unless you think of a saint as a sinner who keeps on trying.”

Great tributes today from all sorts of people, but I particularly enjoyed Tony Blair and Tom Butler this morning – probably my favourite Thought for the Day!


A better system for conducting elections to the Welsh Assembly

Updated 19 November 2013 to use Roger Scully’s data on second preferences

Roger Scully has been writing an interesting series of blogs on how we might improve the electoral system in Wales.

In his most recent article, he looks at the potential for using the Single Transferable Vote system.

I have long supported the STV system as the most effective means of securing proportional representation. It delivers a fair result without the “two tier” system of constituency members plus “top up” members. The main argument against STV is that large multi-member constituencies would reduce the link between voters and their elected member. The danger is that we would end up with lots of “regional members” whereas people feel a closer connection with their constituency members.

My preferred solution for an improved electoral system for Wales would be two-seat STV, which would ensure the Assembly was representative while maintaining a close link between members and their constituents. It would make sense to require all parties to field one man and a woman in each seat where they were standing two candidates, thereby ensuring a much better gender balance in the Assembly (and removing the need for all-women shortlists, the only mechanism any party has used to date which has had any impact on improving gender balance).

The results under such a system would be fairly similar to Roger’s projection for four-member STV:

Two seat STV Four Seat STV
Labour 42 – 43 40
Conservative 23 20
Plaid Cymru  8 – 9 15
Liberal Democrat 5 5
Ind/Other 1 0

There are some seats where third and fourth preferences might make a difference and of course there could be more minor parties contesting these elections, whereas most very small parties chose instead to seek regional seats. Roger has provided data for Green and UKIP transfers – perhaps unsurprisingly UKIP favour the Conservatives while Greens favour Labour. Labour voters meanwhile favour Plaid Cymru. There is no data on Socialist Labour or BNP: they secured just 2.4% each across Wales, but there may be enough of them to affect the outcome in some seats. Rhondda is the closest result: Labour win the first seat comfortably, but based on constituency votes they would win the second seat by just 27 votes. In a result that close, the third preferences of Conservative voters could determine the outcome. On regional votes, Plaid are ahead by 566 but that is without transferring the votes from Socialist Labour (746) and BNP (476) and other minor parties (483) while again third preferences may also have an impact.

I agree with Roger that STV ties the outcome to popular wishes – not just in terms of a voter’s first preference but also their subsequent preferences. Candidates and parties picking up second preferences will do better than those candidates and parties inspiring people to vote anybody but them. This system also has the advantage of eliminating safe seats: although there are twelve constituencies where Labour would have taken both seats, in 2007 there were no seats where this was guaranteed and only three where it was a possibility of which only one was likely. In 2007 the Conservatives and Plaid Cymru had a chance of picking up a second seat in Monmouth and Dwyfor-Meirionydd respectively.

Compared to four-seat STV, it is clear that this system favours the larger parties (note that the totals for Labour and Conservative are marginally higher whereas Plaid Cymru are lower). But personally I think this is better than the current system where the vast majority of seats are distributed on first past the post and the regional seats are too large to have a close connection with the electorate.

It is worth looking at the results in 2007 as well – an election where Labour was still largest party but fared comparatively badly. Under this system I project that Labour would have secured 35 of the 80 seats. This is a similar result to the existing system (Labour secured 26 out of 60 seats). It would be wrong to use the second preference data from 2011 – for example some of the Labour voters who were sympathetic to Plaid Cymru in 2011 voted for Plaid Cymru in 2007 so you cannot assume the proportions of second preferences would have been the same.

In addition to the difficulties in predicting what happens to transfers, of course this system would have an impact on where parties campaign – with no “safe” seats and a need to secure second preferences as well as first preferences. Their success in campaigning would determine the actual outcome.

Two seat STV analysis

Download PDF of the above

Winston Roddick was not eligible to stand in election. IPCC got it wrong say candidates

The following statement has been issued by four of the five candidates contesting the Police & Crime Commissioner election in November 2012

We have followed the complaint made by a member of the public in North Wales about where Winston Roddick QC was actually living at the time of last year’s election and read the detailed report published last week by the Independent Police Complaints Commission (IPCC) with growing unease.  The complainant (Mr Pollard) voted for Mr Roddick and felt that he had been duped when he discovered that Mr Roddick did not live in North Wales at the time of the election.  Unlike Parliamentary and Welsh Assembly Elections, electoral law requires that candidates for Police & Crime Commissioner are registered to vote in the area where they are seeking election – i.e. that they live there.

Mr Roddick has repeatedly failed to be completely open and transparent about why he felt able to stand in last year’s election. He has talked a lot about his undoubted affinity with Caernarfon, which may explain his motivation, but not his eligibility. Unfortunately this lack of clarity continues with the decision of the IPCC to redact all of the addresses in their report. All of this information is already in the public domain and was obtained from public sources by Mr Pollard or was published by Mr Roddick himself in the course of his election campaign.

We therefore urge the IPCC to publish their report unredacted in full so that the public can begin to make sense of Mr Roddick’s claims about his various addresses, rather than put a redacted report into the public domain which gives the distinct impression that there is something to hide.

The IPCC investigation has confirmed that:

  • Mr Roddick’s family home since 1986 is in Cyncoed, Cardiff. Up until 5 October 2012 he was registered to vote at this address. Between 2002 and 2009 he was also registered to vote at an address in London.
  • Mr Roddick added himself to the electoral register at Constantine Road, Caernarfon on 5 October 2012 solely in order to qualify to stand as a candidate in the election for Police & Crime Commissioner, having been advised earlier that same day that it was necessary to be registered in North Wales by the 8th October in order to stand.
  • The Constantine Road address is where his parents lived and is now the home of his brother and his brother’s wife. Mr Roddick and his wife have stayed there regularly over the years.
  • Although Mr Roddick claimed that he had “just moved up” from Cyncoed to Caernarfon, the electoral registration (and claim of having moved) applied to him and not to his wife. Mr Roddick described himself at the time as “in transition”, with permanent homes in Cardiff and London but planning to buy a property in North Wales.

Electoral law allows for the possibility that someone is permanently resident and therefore registered to vote in more than one location.  But Section 5 of the Representation of the People Act 1983 explicitly provides that “where at a particular time a person is staying at any place otherwise than on a permanent basis [italics added], he may in all the circumstances be taken to be at that time

(a)   resident there if he has no home elsewhere, or

(b)   not resident there if he does have a home elsewhere [italics added].”

In early October 2012 it is clear from the IPCC investigation that Mr Roddick was not permanently resident at Constantine Road. He did not intend to live at Constantine Road long term, and continued to have not one but two permanent homes elsewhere.

It is therefore also clear that Mr Roddick was not entitled to be registered to vote at that address on the date nominations closed, and therefore not eligible to stand for election as Police & Crime Commissioner for North Wales.

The IPCC has made a significant error in failing to uphold the complaint, and should instead immediately apologise to Mr Pollard and refer their file on Mr Roddick to the Crown Prosecution Service to consider whether a prosecution is in the public interest.

The substantive complaint (the issue which Mr Pollard tried several times to contact Mr Roddick about in Caernarfon) appears also not to have been investigated and the IPCC therefore also need to look into this failure as a matter of urgency.

Mr Roddick has been given numerous opportunities to clear these matters up. Notably in giving evidence to the Welsh Affairs Select Committee in July 2013, he was asked where he lived and he said he had “homes in various parts of the country because I have practised in various parts of the country, but my home is, was, always will be Caernarfon”.

From the evidence presented by the IPCC, this is clearly a misleading statement. While misleading Parliament is not a criminal offence, it hardly amounts to a tour de force in openness and transparency.

A more accurate summary would be the one that appeared (presumably with his consent) in the S4C 2010 Annual Report: “Winston was born in Caernarfon and although he and his wife have lived in Cardiff for many years, Caernarfon is still very close to his heart”.

In his conversations with electoral services officers in Gwynedd and Flintshire and officers of the Electoral Commission, Mr Roddick made clear that he still had a permanent home in Cardiff. These individuals should all have been aware that if Mr Roddick had a permanent home elsewhere, identifying a temporary home in North Wales was not sufficient for him to be allowed to stand in the election. They were therefore in a position to raise concerns with the Police Area Returning Officer (PARO) at the time of the election – in a way that others were not.

Clearer guidance on the difference between a permanent home and somewhere that a person happens to be staying should be published by the Electoral Commission, and staff urged to raise concerns at the time, so that PCC elections can be run properly without ineligible candidates.

Mr Roddick has sought to portray the complaint lodged against him as an “unwanted distraction”. As the other four candidates in the election, we represent the whole of the political spectrum. We feel that it is important to make this joint statement in the interests of upholding standards in public life.

Winston Roddick CB QC should apologise unreservedly for failing to deal properly with Mr Pollard’s complaint regarding the police.  He should now consider whether by continuing in office he is serving the interests of the people of North Wales, of North Wales Police, of victims of crime – or just himself.

Richard Hibbs

Colm McCabe

Tal Michael

Warwick Nicholson

Candidates contesting Police & Crime Commissioner Elections 15 November 2012Image

The five candidates and Jason Mohammad – Radio Wales Phone-in November 2012


Liberal Democrats honour a manifesto commitment?

With Radio 4 describing the Royal Mail privatisation as reminiscent of Thatcherism, I thought I would check what each party said in their 2010 manifestos. You may recognise a recurring theme here: I think that parties should stand by their commitments to the electorate. As I previously pointed out here, when Stanley Baldwin as Conservative Leader and Prime Minister concluded that the Government’s policy needed to change from what they had offered at the election the previous year, he called another election.

When Welsh Labour entered a coalition with Plaid Cymru in 2007, it was based on comparing the two parties’ manifestos, implementing the things they agreed on and compromising on other issues. Not everyone was happy with the results (it was a bit harsh on the badgers for example) but at least it had a clear basis. In 2010 the Liberal Democrats negotiated on the basis of ditching their own manifesto and doing stuff the Tories wanted to do – regardless of whether or not they had mentioned it in their own manifesto. The most glaring example is this quote from the Lib Dem manifesto:

If spending is cut too soon, it would undermine the much-needed recovery and cost jobs. We will base the timing of cuts on an objective assessment of economic conditions, not political dogma. Our working assumption is that the economy will be in a stable enough condition to bear cuts from the beginning of 2011–12.

As an experiment, doing the precise opposite of this proved a point – the growing economy which they inherited ceased to grow and the cuts were therefore self defeating, with revenues dropping by a similar amount to the cuts in spend and the deficit remaining at a similar level.

So what about Royal Mail privatisation? Much to my surprise, although the Conservatives didn’t say anything about privatising the Royal Mail, the Liberal Democrats did. They said they would:

Give both Royal Mail and post offices a long-term future, by separating Post Office Ltd from the Royal Mail and retaining Post Office Ltd in full public ownership. 49 per cent of Royal Mail will be sold to create funds for investment. The ownership of the other 51 percent will be divided between an employee trust and the government.

So there is a partial mandate for what is happening – but not for the detail. The government stake may end up being as little as 30% while 10% of the shares will be allocated to eligible employees. So between them, employees and the Government will hold a minority stake not a majority stake. And there is a very significant difference between an “employee trust” and employees holding shares – it is about collective bargaining power. Middle-men will make lots of money from commission on the shares which are traded but the sale is bad news for the public and for employees.

There is no mandate for what the Government is doing as well as it being a bad idea in its own right.

Royal Mail is a profitable business. As a privatised company, it will be a dominant player in the market. In these circumstances, there needs to be a tight regulatory framework. Far better, as the CWU have argued, to establish Royal Mail as a ‘not for dividend company’ with profits reinvested back into services and the workforce, operating for the public good, balancing its social obligations with commercial opportunities. If the primary motive for privatising is to enable it to raise capital, such a model would be much more effective.

The Labour 2010 manifesto is worth re-reading:

The Post Office has an invaluable role to play in our communities and in serving local businesses. To promote trusted and accessible banking, we will transform the Post Office into a People’s Bank offering a full range of competitive, affordable products. This will help sustain the network and boost competition in banking. The universal postal service delivered by the Royal Mail connects and binds us together as a country. We are firmly committed to the 28 million homes and businesses across the country receiving mail six days a week, with the promise that one price goes everywhere. The Royal Mail and its staff are taking welcome and needed steps to modernise work practices. For the future, continuing modernisation and investment will be needed by the Royal Mail in the public sector.

A sensible approach which remains sensible today.

The Tories Lib Dems and the Big Six energy companies just don’t get it

It has been really interesting to hear the howls of protest following Ed Miliband’s announcement that an incoming Labour Government will freeze energy prices. Which? estimates that flaws in the energy market had already forced consumers to pay £3.9bn over the odds since 2010. The estimated cost of the price freeze is £4.3bn – so comparable to the amount the energy companies have unfairly extracted from consumers over the lifetime of this Parliament.

The energy companies claim that they need to raise prices in order to fund investment, but the fact is that they have failed to invest. Instead they have chosen to pay bumper dividends to shareholders. Profits for the “big six” which provide energy to 98 per cent of homes have risen sharply:

2009   £2.15 billion

2010   £2.22 billion

2011   £3.87 billion

2012   £3.74 billion

I am not the only one to find it amusing that the person defending these bumper profits (or to put the other side of the coin, failure to invest the money we have handed over in energy bills in new low carbon generation) is ex Tory MP Angela Knight – previously chief apologist for the banking industry.

The last Tory Government also allowed privatised monopolies to fleece us – something addressed by Labour in 1997 with a tax on excess profits. The advantage of Ed Miliband’s approach is it is a very visible example of Government righting the imbalance in power between ordinary people and the privileged few – whereas a tax would be seen as the Government looking after itself. Regulating monopolies (or market domination by a few players) isn’t revolutionary socialism – it is something that the United States of America does. The UK water and rail regulators decide how much prices can increase – giving the energy regulator the power to do the same isn’t going to end capitalism as we know it. In fact it will help many businesses, which have also felt the squeeze from increased energy prices.

Of course the prices freeze doesn’t actually address the long term requirement for investment in new and lower carbon energy – it just deals with the profiteering. On Ynys Môn there is overwhelming support for a new nuclear power station – and without new nuclear we aren’t going to be in a position to reduce our reliance on coal and gas – both of which are high carbon. The private sector is ready to invest, but the UK Government needs to agree the “strike price” – how much Horizon (now owned by Hitachi) will be paid for each megawatt of electricity.

And there’s the rub – because for all the talk about this being a “market” and the “private sector”, companies are demanding government guarantees as a precondition for investment. That’s ok with me – but we need to be very clear about who is taking which risks and what is a fair profit margin. There needs to be transparency and that means splitting energy generation from supply. Ed Miliband and Caroline Flint get that, being clear that the purpose of the freeze is to buy time for this to happen, with an Energy Security Board with responsibility for identifying our energy needs and providing a clear framework to deliver this and a Green Investment Bank with borrowing powers to support investment. As Which? have argued, we also need to move to a single unit price, which would make it easy for us all to understand what we are being charged and what other options are available.  Not only would this make things much simpler, it maximises the incentive to each of us to save energy.

Of course we are also hearing suggestions that the companies will hike their prices now in order to get round the cap. David Cameron and Nick Clegg need to be very careful here. If they allow the energy companies to profiteer even more than they have been already, the result of the General Election is a foregone conclusion. If they feel unable to act to protect the public, then they should make way for a Government which is.

You can read the full text of Ed and Caroline’s speeches and Ed’s letter to the energy companies here.



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